Born as a fiercely independent agency meant to protect citizens, the Consumer Financial Protection Bureau has quickly been subsumed into the Trump administration. Banks, student-loan agencies and payday lenders are the winners.
But Mulvaney couldn’t overturn the ability-to-pay rule. Since it had been finalized, he didn’t have the legal authority to reverse it on his own. Mulvaney announced that the bureau would begin reconsidering the rule, a complicated and potentially lengthy process. The CFPB, under Cordray, had spent five years researching and preparing it.
Under the Congressional Review Act, lawmakers can nix federal rules during their first 60 days in effect. In the House, a bipartisan group of representatives filed a joint resolution to abolish the ability-to-pay rule. Lindsey Graham, R-S.C., led the charge in the Senate. But supporters couldn’t muster a decisive vote in time, in part because opposition to payday lenders crosses party lines.
By , the CFSA members were growing impatient. But the Trump administration was willing to listen. The CFSA’s Shaul was granted access to a top Mulvaney lieutenant, according to Mick Mulvaney’s Master Class in Destroying a Bureaucracy From Within in The New York Times Magazine, which offers a detailed description of the behind-the scenes maneuvering. Shaul told the lieutenant that the CFSA had been preparing to sue the CFPB to stop the ability-to-pay rule but now believed that it would be better to work with the bureau to write a new one. Cautious about appearing to coordinate with industry, according to the article, the CFPB was non-committal.
Days later, the CFSA sued the bureau. The organization’s lawyers argued in court filings that the bureau’s rules defied common sense and basic economic analysis. The suit claimed the bureau was unconstitutional and lacked the authority to impose rules.
A month later, Mulvaney took a rare step, at least, for most administrations: He sided with the plaintiffs suing his agency. Mulvaney filed a joint motion asking the judge to delay the ability-to-pay rule until the lawsuit is resolved.
By February of this year, Kraninger had taken charge of the CFPB and proposed to rescind the ability-to-pay rule. Her official announcement asserted that there was insufficient evidence and legal support for the rule and expressed concern that it would reduce access to credit and competition.
Kraninger’s announcement sparked euphoria in the industry. One industry blog proclaimed, It’s party time, baby! with a GIF of President Trump bobbing his head.
Kraninger’s decision made the lawsuit largely moot. But the suit, which has been stayed, has still served a purpose: This spring, a federal judge agreed to freeze another provision of the regulation, one that limits the number of times a lender can debit a borrower’s bank account, until the fate of the overall rule is determined.
As the wrangling over the federal regulation plays out, payday lenders have continued to lobby statehouses across the country
For example, a company called Amscot pushed for a new state law in Florida last year. Amscot courted African American pastors and leaders located in the districts of dozens of Democratic lawmakers and chartered private jets to fly them to Florida’s capital to testify, according to the Tampa Bay Times. The lawmakers subsequently passed legislation creating a new type of payday loan, one that can be paid in installments, that lets consumers borrow a maximum $1,000 loan versus the $500 maximum for regular payday loans. Amscot CEO Ian MacKechnie asserts that the new loans reduce fees (consumer advocates disagree). He added, in an email to ProPublica and WNYC: We have always worked with leaders in the communities that we serve: both to understand the experiences of their constituents with regard to financial products; and to be a resource to make sure everyone understands the law and consumer protections. Educated consumers are in everyone’s interest. For their part, the leaders denied that Amscot’s contributions affected their opinions. As one of them told the Tampa Bay Times, the company is a great community partner.
The CFPB’s Declaration of Dependence
Kraninger spent her first three months in office embarking on a listening tour. She traveled the country and met with more than 400 consumer groups, government officials and financial institutions. Finally, in mid-April, she gave her first public speech at the Bipartisan Policy Center in Washington, D.C. The CFPB billed it as the moment she would lay out her vision for the agency.
Kraninger said she hoped to use the CFPB’s enforcement powers less often. She alluded to a report by the Federal Reserve that 40% of Americans would not be able to cover an emergency expense of $400. Her suggestion for addressing that: educational videos and a booklet. To promote effective approaches to savings and particularly emergency savings, Kraninger explained, the Bureau recently launched our Start Small, Save Up initiative. It offers tips, tools and information to help consumers build a basic savings cushion and develop a savings habit. Later this year, we will be launching a savings boot camp,’ a series of videos, and a very readable, informative booklet that serves as a roadmap to a savings plan.